Serbia: Amendments to the Company Law

The main reasons for the adoption of amendments to the Company Law (Official Gazette of Republic of Serbia nos. 36/11, 99/11, 83/14 – other law, 5/15 and 44/18) (the “Law”), which started to apply from 9 June 2018 (except amendments
relating to the harmonisation with legislation of the European Union, which
shall apply from 1 January 2022 and certain provisions which shall apply from 1
October 2018) are the improvement of the existing system and harmonization with
the international standards in this area. The text below provides an overview
of the most important changes.

Registration of e-mail address and electronic registration

The Law introduces the obligation to register the e-mail address, as well a legal ground for replacing the public notary signature certification of
the company’s members in the incorporation act with the qualified electronic
signature. It is expected that the electronic application for registration will
be 20-30% cheaper than the so far used “paper-based” form.

Corporate seal to be abolished

One of the greatest novelties is the abolishment of the corporate seal. So far, even though the corporate seal has previously been declared
non-mandatory, companies faced many difficulties due to the fact that the use
of a corporate seal was obligatory under various other laws and acts of
secondary legislation.

Business Name

Companies may now use in their business names the acronym SRB, but only with the previous consent of the relevant authority (in this case with the
consent of Ministry of the Economy).

Protection of minority shareholders

The shareholding interest threshold which authorises a shareholder to request a convening of the general assembly has been decreased from 20% to 10%.
In addition, the shareholding interest threshold which authorises a shareholder
to put an item on the agenda of the general assembly has been decreased from
10% to 5%.

Transactions involving personal interest

If the value of the transaction is less than 10% of the company's book asset value, no approval by the shareholders with no personal interest or
directors is needed.

If the value of the transaction involving personal interest is greater than 10% of the company's book assets value, the approval
procedure is made more stringent:

1. the company must
obtain an assessment by an authorised court expert, auditor etc. of the market
value of the assets subject to the transaction; and,

2. once the approval has been obtained, the company must publish on its website, or on the website of the Business Registers Agency, detailed
information on the transaction and the personal interest involved.

Acquisition and disposal of assets of significant value

The amendments introduce in more precise manner the notion of related acquisitions i.e. what shall be deemed as such. Further, it is now clearly prescribed
that the value of the obligation under loan agreement or other legal
transaction and the value of the collateral given for such obligation shall not
be aggregately taken into account in order to determine whether or not the
disposal of assets of significant value took place. In that regard, the highest
value of respective single transaction/action shall be relevant.

Registration of the branch of domestic company

With this change, the Law intends to harmonize the treatment of the domestic and foreign branches, introducing the obligation to register a domestic
branch before the Business Registers Agency.

Compulsory liquidation

The most
significant change in relation to liquidation refers to the shortening of the
deadline for the finalization of compulsory liquidation to 180 days. The
provisions on reasons, initiation, course, and finalization of compulsory
liquidation are tailored in a more detailed manner.

Procura issuance

The
procura will be issued by the director, board of directors or executive board
instead of the general assembly.

Dividend payment

The Law
prescribes a shorter deadline for the payment of dividend - within six months
from the day of enacting of the decision on dividend payment, which should
significantly reduce the risk of non-payment of dividend.

Cross border mergers

The
Law for the first time regulates cross border mergers. In cross-border merger
at least two companies are involved of which at least one company must be
registered in the territory of the Republic of Serbia and at least one
company must be registered in the territory of European Union member state or
in a state party to the Treaty on the European Economic Area.

Harmonization with EU legislation

In order to harmonize with the EU legislation, the
Law introduces a new type of company - European company (in the obligatory
form of joint stock company with the minimum initial capital of EUR 120,000.00,
with abbreviation SE). The Law also introduces the European Economic Interest
Group (with abbreviation EEIG), which is defined as an interest group with
the characteristics of business association.